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Warren Buffett's strategic moves

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2023-06-23

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Warren Buffet continues to show the rest of the global investment community that he has ‘timing’ when it comes to making big plays in investment (and that remains very generous).

From dominant positions in Coca Cola, and American Express, to helping bail out Wall Street banks after the GFC (and ending up as the biggest shareholder in Bank of America) to making a massive play in Apple shares, and last year grabbing positions in US oil groups, Chevron and Occidental, Buffett has show he can be the ultimate master of timing.

Then there’s his el cheap 2008 purchase of 20% of BYD, then a Chinese battery maker with auto aspirations - now it's the world’s biggest EV maker as well as being Number 2 in batteries.
Berkshire has taken profits on BYD over the past year but still has just under 10%.

Now Berkshire Hathaway has added to its holdings in Japan’s five biggest trading houses for a third time in three years, and helped once again to propel the nation’s stock market to multi-year highs.

Berkshire said this week its stakes in Itochu, Marubeni, Mitsubishi Corp, Mitsui & Co, and Sumitomo now average more than 8.5%.

It first announced the buys in August, 2020 and earlier this year when Buffett visited Japan in April this year and met with the CEOs of five major trading companies one after another.

He said then that Berkshire owned 7.4% of the five trading company shares as of April, excluding shares of treasury stock.

With these additional purchases, Berkshire now owns on average, more than 8.5% of the five giants.

In Monday’s statement, Berkshire repeated its intention to hold those stakes for the long term and Buffett's desire to hold up to 9.9% of each of the five companies.

Buffett’s investments and his optimism about Japan’s prospects have drawn attention to the country’s improving economic conditions and corporate governance reforms that have helped underpin a sparkling rally in the Nikkei share average.

Ten weeks of consecutive gains have helped the Nikkei rise 27% this year, helped by the blessing of investing in Japan from the so-called Oracle of Omaha, as Buffett is called sometimes.

Berkshire said the aggregate value of the investments is the largest of any Berkshire-held public stocks outside the US.

The five firms are the largest of Japan’s so-called sogo-shosha, or general trading companies, and focus on diversified long-term investments that prioritise value and cash flow. Traditionally, they have been central to imports of energy, minerals and food into Japan and exporters of finished products.

The announcement led to increasing interest in Japanese equities. Throughout April, foreign investors purchased a net $US15.6 billion worth of Japanese shares, the highest monthly level in several years, according to data from the Japan Exchange Group. The data showed they have continued to add to their positions in May.

Berkshire Hathaway owns no other investments in Japan.

The stocks are all up more than 30% this year, with Marubeni shares up 62%. That stock has more than tripled in price since the end of 2020.

The August, 2020 announcement of the stakes said they were valued at more than $US6 billion.

The trading firms’ regulatory filings of June 12 showed Berkshire holding 7.4% of Itochu’s stock, 8.3% of Marubeni and Mitsubishi’s stock, 8.1% of Mitsui’s stock and 8.2% of Sumitomo’s stock.

As of this week the five shareholdings are valued at 2.8 trillion yen, or around $US19.7 billion.
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The rising investment in Japan (financed by yen bond raisings in that country by Berkshire) is in contrast to what Buffett has been doing in what was previously his biggest non-US investment, Chinese EV and battery maker, BYD.

Berkshire has recently sold more shares in Chinese electric vehicle and battery maker, BYD to take the company’s holding under the 10% mark, or less than half the 225 million shares it bought back in 2008.

Berkshire Hathaway sold 1.96 million BYD shares worth about $US58.9 million, leaving the conglomerate with more than 108 million shares

Since Berkshire first bought its BYD shares in 2008 for $225 million the company has grown into the world’s largest electric car manufacturer (including plug-ins) and second biggest battery group and its stock price has soared. BYD sold nearly 1.9 million cars last year including pure electrics, plug-ins and hybrids.

Berkshire’s original BYD stake was worth more than $US9.5 billion last July before it started selling. Even after all the stock sales, Berkshire’s remaining holdings are still worth more than $US3.3 billion.

Since Berkshire first bought its BYD shares in 2008 for $225 million the company has grown into the world’s largest electric car manufacturer (including plug-ins) and second biggest battery group and its stock price has soared. BYD sold nearly 1.9 million cars last year including pure electrics, plug-ins and hybrids.

Berkshire’s original BYD stake was worth more than $US9.5 billion last July before it started selling. Even after all the stock sales, Berkshire’s remaining holdings are still worth more than $US3.3 billion.

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Meanwhile Warren Buffett revealed his annual charitable donations on another annual distribution to five foundations, boosting his total charitable giving to more than $US50 billion — significantly higher than his entire net worth in 2006 when he first started making the grants.

The 92-year-old legendary investor (he turns 93 in August) said Thursday he has converted over 9,000 Berkshire Class A (voting) shares into V shares in the company in order to donate 13.7 million B shares to five foundations.

A total of 10.5 million shares were delivered to the Bill & Melinda Gates Foundation Trust, and 1.05 million shares were donated to the Susan Thompson Buffett Foundation, named for his first wife, who died in 2004.

Another 2.2 million shares were split evenly among the three foundations run by his children: the Sherwood Foundation, the Howard G. Buffett Foundation and the NoVo Foundation. The B shares closed at $US336.96.

The “Oracle of Omaha” said the schedule for annual grants was made on June 26, 2006, when he owned $US43 billion of Berkshire A shares. Buffett pledged in a 2006 letter to make annual gifts of Berkshire B shares throughout his lifetime for the benefit of the Bill & Melinda Gates Foundation, which he has been doing, along with gifts to his family’s foundation.

“During the following 17 years, I have neither bought nor sold any A or B shares nor do I intend to do so. The five foundations have received Berkshire B shares that had a value when received of about $50 billion, substantially more than my entire net worth in 2006,” Buffett said. “I have no debts and my remaining A shares are worth about $112 billion, well over 99% of my net worth.”

Last year, Buffett donated more than $US750 million to the four foundations associated with his family on Thanksgiving eve as the “ultimate endorsement” in his children.

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Source: Finance News Network

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